athenahealth Crumbles on Einhorn's Short Call - Analyst Blog

By: Zacks.com

Posted: 5/8/2014 4:20:00 PM

Referenced Stocks: ATHN;ENZY;GLRE;INSY

Shares of
athenahealth Inc.
(
ATHN
) tanked after founder and president of hedge fund behemoth
Greenlight Capital
(
GLRE
) David Einhorn revealed that the company is highly overvalued and,
as a result, he has decided to short the stock as its price will
eventually fall.

Einhorn has, in fact, predicted that shares of athenahealth may
fall substantially by as much as 80% from its all-time high reached
earlier this year. He has also questioned the issue of innovation
of the company and raised doubts about its ability to compete with
privately held Epic Systems, which offers similar lines of
services.

Shares of athenahealth sunk nearly 15% till date after Einhorn's
description of the stock as "bubble stock" at the Ira Sohn
Investment Conference in New York last Monday.

athenahealth does appear overvalued compared to its peers. Its
forward price-to-earnings (P/E) ratio of 443.2 is higher than the
P/E of 42.94 of its peer group. However, its long-term EPS growth
of 23.8% is higher than the peer level of 17.6%.

athenahealth posted adjusted loss of $3.0 million or 8 cents per
share in the first quarter of 2014 in stark contrast to earnings of
$6.0 million or 16 cents per share in the same quarter of 2013. The
loss per share was broader than the Zacks Consensus Estimate of a
loss of a penny for the quarter.

Revenues in the quarter rose 29.8% to $163.0 million but lagged the
Zacks Consensus Estimate of $170 million. Excluding the Epocrates
and other revenues (consisting of third-party tenant revenues)
totaling $14.8 million, core athenahealth revenues rose 23% to
$148.2 million in the quarter.